The new Microsoft: How the reorg will affect you

If you use Microsoft products -- and who doesn't? -- there are some important changes ahead

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Those are the four engineering groups -- the core of the company. In addition:

  • Tony Bates, formerly known as Mr. Skype, gets corporate planning and a huge checkbook for acquisitions and hosannahs in the Business Development and Evangelism group.
  • Tami Reller, current CFO of the Windows division (and recently passed over for the position Hood now occupies), becomes the head of an oddly independent marketing group. Details are sketchy at this point, with much talk about dotted lines.
  • Many of you will be pleased to know that Eric Rudder has his own Advanced Strategy and Research group: "Research, trustworthy computing, teams focused on the intersection of technology and policy, and ... our cross-company looks at key new technology trends."

The strange bedfellows

The shuffling of deck chairs leads to some strange bedfellows:

  • Devices' Larson-Green gets Music and TV services, begging the question of when a service is, in fact, a device.
  • Larson-Green also gets the Xbox console, but "Mr. Windows" Myerson gets the Xbox software.

What of Kurt del Bene, former king of Office, and Kirill Tatarinov, lord of Dynamics for many moons? They died at the end of Season 3 at the hand of the treacherous Lannisters. Er, del Bene has officially registered his retirement. Tatarinov remains in charge of an oddly free-floating Dynamics group, but "his product leaders will dotted line report to Qi Lu, his marketing leader will dotted line report to Tami Reller, and his sales leader will dotted line report to the COO group." Sounds like the prelude to a very abrupt career change.

The most important change of all, in my view, comes in the financial reporting realm. Until yesterday, Microsoft CFOs by and large reported to their division chiefs. Ballmer is realigning things so CFOs report directly to Hood. That clears the way for all sorts of changes, including the ability to set goals in the divisions that aren't chained to a P&L.

Former Microsoft GM Hal Berenson hit the nail on the head:

A new organization structure in which the engineering leaders are not responsible for short-term business metrics would allow them to carry review commitments with sufficient weight to truly encourage cooperation. Let me try a concrete hypothetical example: It would be easier to seriously hold the engineering leader of Office and the engineering leader of Windows responsible for doing whatever it takes to ship a great set of Metro Office apps ASAP if you aren't also telling them Job No. 1 is to meet this year's revenue and contribution margin goals.

Taking the CFOs out of line command also opens up the possibility that Microsoft will change how it reports performance and profits to the world at large. If you think Microsoft's reporting reeks of obfuscation now, just wait.

The more things change, the more they don't

For anyone who thinks of Ballmer's succession planning as an exercise in spaghetti pattern-matching, this new arrangement presents a recurring theme: Since Sinofsky left in November 2012, no obvious CEO candidate has emerged. Nadella may ultimately gain the stature necessary to take the reins, but with that sole exception I don't see any new CEOs being groomed. That doesn't bode well for Microsoft long term.

The reorg is being billed as a giant lovefest, with greater cooperation among operating divisions. But people tend to forget that the 2005 shakeup had a similar goal. Back then, Bob Enderle of the Enderle Group said "the reorganization ... aligns different groups that previously were separate divisions ... [and] also gives people an approachable throat to choke -- in the form of a division president -- if there are problems with collaboration between teams."

Many throats have been choked in the past eight years, but it isn't doesn't appear that the 2005 reorg led to greater cooperation between Microsoft fiefdoms, much less better products. Even Steve Sinofsky was a team player -- as long as you were on his team.

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